The School Tax increase on homes valued over $3M-some factual information

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Q: Where can I read more about this issue?  I would like to understand the bigger picture.

A: Here are some news articles and radio programs explaining the tax (es) in budget 2018 and the bigger picture on why we want to increase fairness in the taxation system through taxes on high-value property:

http://www.macleans.ca/economy/realestateeconomy/vancouver-real-estate-why-multi-million-dollar-home-owners-are-crying-poor/

CBC early Edition: Economist Rhys Kesselman and West Vancouver Mayor Mike Smith debate the fairness of the proposed school tax increase

CBC BC Almanac:May 1 Rhys Kesselman, professor emeritus at SFU School of Public Policy and First Shaughnessy homeowner Jonathan Rubenstein  

https://doodles.mountainmath.ca/blog/2018/05/01/a-modest-school-tax-proposal/

http://www.policynote.ca/everything-you-wanted-to-know-about-the-housing-taxes-and-expenditures-in-bc-budget-2018/

http://vancouversun.com/opinion/op-ed/rhys-kesselman-what-is-this-new-radical-confiscatory-b-c-tax

http://vancouversun.com/news/local-news/ndp-tax-changes-do-better-job-of-taxing-wealth-flows-demographer

https://www.huffingtonpost.ca/2016/08/18/joseph-stiglitz-tax-homes-canada_n_11592272.html

Here is a factual description of the mechanics of the school tax increase on homes over $3M:

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/annual-property-tax/understand/school-tax

Here are property tax rates across major Canadian cities, for a comparative perspective: https://www.altusgroup.com/wp-content/uploads/2017/10/Canadian-Property-Tax-Rate-Benchmark-Report.pdf

updated chart May 10, 2018

*property assessment in these cities averaged over previous 4 years, resulting in effective rate less than stated rate: thanks to Tom Davidoff for suggested amendment/comparison.  Note that even with qualifications based on assessment protocol, Vancouver tax rates are relatively low.

**property assessment in Montreal frozen at 2016 til 2018 resulting in lower effective rate: thanks to Tom Davidoff for suggested amendment.  Note that even with qualifications based on assessment protocol, Vancouver tax rates are relatively low.

2017 Calgary Montreal stated mill rate **Montreal effective mill rate Ottawa stated mill rate *Ottawa effective mill rate Toronto stated mill rate *Toronto effective mill rate Vancouver pre-tax Vancouver estimated post tax UEL pre-tax
UEL estimated post Tax
$2M home $13,000.00 $19,760.00 $18,960.00 $21,360.00 $19,220.00 $13,240.00 $9,640.00 $5,100.00 $5,100.00 $4,340 $4,340
$4M home $26,000.00 $39,520.00 $37,920.00 $42,720.00 $38,440.00 $26,480.00 $19,280.00 $10,200.00 $12,200.00 $8,680 $10,680
$5M home $32,500.00 $49,400.00 $47,400.00 $53,400.00 $48,050.00 $33,100.00 $24,100.00 $12,750.00 $18,750.00 $10,850 $16,850
$8M home $52,000.00 $79,040.00 $75,840.00 $85,440.00 $76,880.00 $52,960.00 $38,560.00 $20,400.00 $38,400.00 $17,360 $35,360
$10M home $65,000.00 $98,800.00 $94,800.00 $106,800.00 $96,100.00 $66,200.00 $48,200.00 $25,500.00 $51,500.00 $21,700 $47,700

Q: What should seniors do about this tax if they don’t feel able to pay?

A:  BC Property owners who are disabled, over 55, or with children under 18 years old can defer taxes in a program that has been available since 1974.    It is a program that offers extremely low fees, very favorable rates, and simple rather than compound interest. In fact it has been criticized for being non-means tested and actually being too favourable in its terms.  Seniors who want to stay in their houses and defer taxes are welcome to do so, and many are already using this program.

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/annual-property-tax/defer-taxes

http://www.cbc.ca/news/canada/british-columbia/property-tax-deferral-michael-geller-1.3391775

http://vancouversun.com/news/local-news/b-c-seniors-struggling-to-pay-property-taxes-should-consider-deferring-seniors-advocate

 

Q: the school tax is misrepresented as helping schools.  Actually you’re using this as a “tax grab” to bolster revenues elsewhere

A: It is true that the school tax is the proportion of provincial revenue realized from property taxes, and it is not earmarked for schools alone. (This name is a legacy from its use as sole source of local school funding in US and is a common name across provinces for the provincial share of property tax revenue–look on the property tax information websites for Toronto, Montreal, etc. It is not a new name and it is not a new tax).

However, we don’t collect school taxes and then spread the wealth in other areas: we collect school taxes and then subsidize schools from other sources in general revenues as well—income taxes and other sources of revenue that we all share.  The province is set to spend over $6B on schools this fiscal year.  The province collected approximately $2B in property taxes last year.  This tax increase is projected to raise $200M per year once in effect.

Compare our projected revenue from the school tax (increase) to the amount that we are spending on schools:

Provincial share of Property/School tax (increase)  School spending + capital expenditure

FY2018-19            2.626B (200M)                                                   6.341B +483M

FY2019-20            3.000B (200M)                                                   6.374B+621M

 

 

Q.: Can you walk me through the math?  I know that the additional progressive portion of the school tax is .2% of the amount between $3-4M and .4% of the amount over $4M, but I want to double check my calculations.

A: Remember, this is not a new tax, but a new bracket of the provincial portion of your municipal property tax bill, otherwise known as the school tax.  In Vancouver, you find your tax rate here: http://vancouver.ca/home-property-development/property-tax.aspx   At the UEL, assessed at a rural rate, you find your tax rate here: https://www2.gov.bc.ca/gov/content/taxes/property-taxes.   Starting in 2019, the provincial portion of this bill will increase for homeowners with assessments over $3M, only on the portion of their assessment over $3M.

Below $3M assessment: no additional tax.

assessment value high-value home additional school tax 2019
 $          3,100,000  $           200
 $          3,200,000  $           400
 $          3,300,000  $           600
 $          3,400,000  $           800
 $          3,500,000  $        1,000
 $          3,600,000  $        1,200
 $          3,700,000  $        1,400
 $          3,800,000  $        1,600
 $          3,900,000  $        1,800
 $          4,000,000  $        2,000
 $          4,100,000  $        2,400
 $          4,200,000  $        2,800
 $          4,300,000  $        3,200
 $          4,400,000  $        3,600
 $          4,500,000  $        4,000